Planning for a year's prosperity

Contents

Income tax

Use your personal tax allowances and reliefs

Capital and the related income can normally be transferred between husband and wife or civil partners without any tax liabilities. Such transfers must be outright gifts and can be made free of both capital gains tax and inheritance tax

Consider paying your husband/wife/children a salary for working in your business

Consider taking your husband/wife/children or other family members into partnership

Consider one-off or recurring donations to charity.

Benefits in kind

Keep records of business trips showing the date, mileage, and purpose of trip to satisfy HMRC queries

Consider reimbursing your employer for the full cost of private petrol to prevent the car fuel charge applying

Remember that no tax is charged on beneficial loans totaling less than £10,000 per employee.

Inheritance tax

Consider lifetime gifts to individuals or trusts (gifts to spouses are exempt)

Maximise business property relief and agricultural property relief

Life assurance policies can be used as a way of making gifts to beneficiaries, and also to build up sufficient money to pay any IHT that may eventually become due

The annual £3,000 exemption applies to both husband and wife or civil partners and can be carried forward for one year, but then used only if the exemption for the later year is utilised

Other reliefs are: £250 small gift exemption, marriage gifts exemption, and gifts for charities, national purposes, public benefit, and political parties.

Year end tax planning for sole traders, partnerships, and companies

The following planning pointers focus on the accounting year end rather than the tax year end:

Defer income/advance expenditure - there is relief on 100% relief of up to £500,000 on qualifying capital expenditure. Contact us to determine your entitlement.

Companies may defer sales of chargeable assets until after the year end, thereby deferring capital gains

Sole traders and partnerships may consider advancing the sale of chargeable assets if current year capital gains annual exemptions have not been used

If your business is seasonal, consider changing your accounting date. The tax rules associated with such a change are complex and great care on the selection of an alternative accounting date is required

If you are thinking of embarking on a new business venture, bring forward the commencement date to offset any initial losses against current year's business profits

Gains made on the sale of business assets may be rolled over on certain classes of business asset against purchases of replacement assets. Consider whether you need to bring forward the purchase of a replacement asset to enable this relief to be used.

Dividend or bonus?

For company profits of up to £300,000, it is normally more tax effective to pay a dividend than a bonus

Consider the timing of dividends and bonuses with regard to the personal tax position of company shareholders.